<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED SEPTEMBER 30, 1996 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
Commission File Number 1-9215
----------------------------------------
UNITED ASSET MANAGEMENT CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 04-2714625
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
ONE INTERNATIONAL PLACE
BOSTON, MASSACHUSETTS 02110
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 330-8900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. X Yes No
----- -----
The number of shares of common stock outstanding as of November 4, 1996
was 68,628,027.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements. (F-1 to F-5)
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. (F-5 to F-8)
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Certain of the Company's subsidiaries are subject to legal proceedings
arising in the ordinary course of business. On the basis of
information presently available and advice received from counsel, it
is the opinion of management that the disposition or ultimate
determination of such legal proceedings will not have a material
adverse effect on the financial position of the Company.
Item 2. Changes in Securities. Not Applicable
Item 3. Defaults Upon Senior Securities. None
Item 4. Submission of Matters to a Vote of Security Holders. None
Item 5. Other Information. None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 2 - Not Applicable
Exhibit 3 - Not Applicable
Exhibit 4 - Not Applicable
Exhibit 10 - Not Applicable
Exhibit 11 - Calculation of Earnings Per Share (F-9)
Exhibit 15 - Not Applicable
Exhibit 18 - Not Applicable
Exhibit 19 - Not Applicable
Exhibit 22 - Not Applicable
Exhibit 23 - Not Applicable
Exhibit 24 - Not Applicable
Exhibit 27 - Financial Data Schedule
(b) A report on Form 8-K was filed on September 3, 1996. The items
reported and financial statements filed were as follows:
Item 5. OTHER EVENTS.
The report announced the acquisitions by UAM of Rogge
Global Partners Plc and Clay Finlay Inc.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) PRO FORMA FINANCIAL INFORMATION.
(1) Unaudited Pro Forma Condensed Combined
Balance Sheet of UAM as of December 31, 1995
and December 31, 1994.
(2) Unaudited Pro Forma Condensed Combined
Statement of Operations of UAM for each of
the three years ended December 31, 1995,
December 31, 1994 and December 31, 1993.
(3) Unaudited Pro Forma Condensed Combined
Balance Sheet of UAM as of June 30, 1996.
<PAGE>
(4) Unaudited Pro Forma Condensed Combined
Statement of Operations of UAM for the six-
month period ended June 30, 1996.
(b) RESTATED FINANCIAL STATEMENTS.
(1) Unaudited Consolidated Statement of Income for
the six-month periods ended June 30, 1996 and
June 30, 1995.
(2) Unaudited Condensed Consolidated Balance Sheet as
of June 30, 1996 and Condensed Consolidated
Balance Sheet as of December 31, 1995.
(3) Unaudited Condensed Consolidated Statement of Cash
Flows for the six-month periods ended June 30,
1996 and June 30, 1995.
(4) Notes to Unaudited Condensed Consolidated
Financial Statements for the six-month periods
ended June 30, 1996 and June 30, 1995.
(5) Report of Independent Accountants.
(6) Consolidated Balance Sheet as of December 31, 1995
and 1994.
(7) Consolidated Statement of Income for each of the
three years in the period ended December 31, 1995.
(8) Consolidated Statement of Cash Flows for each of
the three years in the period ended December 31,
1995.
(9) Consolidated Statement of Changes in Stockholders'
Equity for each of the three years in the period
ended December 31, 1995.
(10) Notes to Consolidated Financial Statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED ASSET MANAGEMENT CORPORATION
November 7, 1996 /s/ William H. Park
- ---------------------- -------------------------
(Date) William H. Park
Executive Vice President and
Chief Financial Officer
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
UNITED ASSET MANAGEMENT CORPORATION
CONSOLIDATED STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------------------- --------------------------------
1996 1995(1) 1996 1995(1)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . . . . . . . . $219,618,000 $185,367,000 $634,805,000 $525,112,000
------------ ------------ ------------ ------------
Operating expenses:
Compensation and related
expenses. . . . . . . . . . . . . . . . . . . 111,050,000 90,690,000 313,740,000 256,173,000
Amortization of cost assigned
to contracts acquired . . . . . . . . . . . . 24,292,000 24,570,000 77,654,000 68,432,000
Other operating expenses . . . . . . . . . . . . 34,473,000 27,975,000 101,644,000 81,980,000
------------ ------------ ------------ ------------
169,815,000 143,235,000 493,038,000 406,585,000
------------ ------------ ------------ ------------
Operating income . . . . . . . . . . . . . . . . . 49,803,000 42,132,000 141,767,000 118,527,000
------------ ------------ ------------ ------------
Non-operating expenses:
Interest expense, net. . . . . . . . . . . . . . 9,048,000 11,843,000 29,284,000 31,278,000
Other amortization . . . . . . . . . . . . . . . 540,000 449,000 1,470,000 1,212,000
------------ ------------ ------------ ------------
9,588,000 12,292,000 30,754,000 32,490,000
------------ ------------ ------------ ------------
Income before income tax expense . . . . . . . . . 40,215,000 29,840,000 111,013,000 86,037,000
Income tax expense . . . . . . . . . . . . . . . . 17,210,000 12,781,000 47,644,000 37,667,000
------------ ------------ ------------ ------------
Net income . . . . . . . . . . . . . . . . . . . . $ 23,005,000 $ 17,059,000 $ 63,369,000 $ 48,370,000
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Earnings per share:
Primary earnings per share . . . . . . . . . . . $.32 $.25(2) $.88 $.70(2)
Fully diluted earnings per
share. . . . . . . . . . . . . . . . . . $.32 $.24(2) $.88 $.69(2)
Dividends declared per share. . . . . . . . . . $.17 $.15(2) $.49 $.43(2)
</TABLE>
(1) Restated due to pooling of interests transactions completed in the third
quarter of 1996.
(2) Historical per-share figures restated for a two-for-one common stock split
declared May 16, 1996.
See Notes to Condensed Consolidated Financial Statements.
F-1
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
September 30, December 31,
1996 1995(1)
(Unaudited)
- --------------------------------------------------------------------------------
Assets
Current assets:
Cash and cash equivalents . . . . . . . $ 197,474,000 $ 125,448,000
Investment advisory fees receivable . . 151,794,000 134,822,000
Other current assets. . . . . . . . . . 11,295,000 14,149,000
-------------- --------------
Total current assets . . . . . . . . . . . 360,563,000 274,419,000
Fixed assets, net. . . . . . . . . . . . . . 30,435,000 28,428,000
Cost assigned to contracts acquired, net . . 959,747,000 1,037,280,000
Other assets . . . . . . . . . . . . . . . . 64,008,000 60,508,000
-------------- --------------
Total assets . . . . . . . . . . . . . . . . $1,414,753,000 $1,400,635,000
-------------- --------------
-------------- --------------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable and accrued
expenses . . . . . . . . . . . . . . . $ 107,392,000 $ 97,250,000
Accrued compensation. . . . . . . . . . 100,512,000 86,710,000
Current portion of notes payable. . . . 2,972,000 6,780,000
-------------- --------------
Total current liabilities. . . . . . . . . . 210,876,000 190,740,000
Senior notes payable . . . . . . . . . . . . 150,000,000 150,000,000
Subordinated notes payable . . . . . . . . . 491,043,000 523,520,000
Deferred income taxes. . . . . . . . . . . . 37,797,000 44,606,000
-------------- --------------
Total liabilities. . . . . . . . . . . . . . 889,716,000 908,866,000
-------------- --------------
Commitments and contingencies
Stockholders' equity:
Common stock, par value $.01 per share. 692,000 692,000
Capital in excess of par value. . . . . 345,320,000 341,631,000
Retained earnings . . . . . . . . . . . 195,500,000 180,950,000
-------------- --------------
541,512,000 523,273,000
Less treasury shares at cost. . . . . . (16,475,000) (31,504,000)
-------------- --------------
Total stockholders' equity . . . . . . . . . 525,037,000 491,769,000
-------------- --------------
Total liabilities and stockholders'
equity. . . . . . . . . . . . . . . . . . $1,414,753,000 $1,400,635,000
-------------- --------------
-------------- --------------
(1) Restated due to pooling of interests transactions completed in the third
quarter of 1996.
See Notes to Condensed Consolidated Financial Statements.
F-2
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------------- --------------------------
1996 1995(1) 1996 1995(1)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net income. . . . . . . . . . . . . . . . $ 23,005,000 $ 17,059,000 $ 63,369,000 $ 48,370,000
Adjustments to reconcile net
income to net cash flow
from operating activities:
Amortization of cost assigned
to contracts acquired. . . . . . . 24,292,000 24,570,000 77,654,000 68,432,000
Depreciation . . . . . . . . . . . . . 2,638,000 1,871,000 6,749,000 4,938,000
Other amortization . . . . . . . . . . 540,000 449,000 1,470,000 1,212,000
-------------- ------------- ------------- ------------
Net income plus amortization and
depreciation . . . . . . . . . . . . . 50,475,000 43,949,000 149,242,000 122,952,000
Changes in assets and liabilities:
Increase in investment advisory
fees receivable. . . . . . . . . . (16,120,000) (8,912,000) (16,660,000) (38,042,000)
Decrease (increase) in other
current assets . . . . . . . . . . 1,534,000 237,000 2,845,000 (1,315,000)
Increase (decrease)in accounts
payable and accrued
expenses . . . . . . . . . . . . . (6,048,000) 8,051,000 10,703,000 20,867,000
Increase in accrued
compensation . . . . . . . . . . . 23,437,000 16,083,000 13,788,000 21,208,000
Increase (decrease) in deferred
income taxes . . . . . . . . . . . (1,968,000) 801,000 (6,809,000) 5,338,000
-------------- ------------- ------------- ------------
Net cash flow from operating
activities . . . . . . . . . . . . . . . 51,310,000 60,209,000 153,109,000 131,008,000
-------------- ------------- ------------- ------------
Cash flow used in investing
activities:
Cash additions to cost assigned
to contracts acquired. . . . . . . . . (20,000) (201,000) (123,000) (40,862,000)
Change in other assets. . . . . . . . . . (6,976,000) (4,308,000) (13,690,000) (15,619,000)
-------------- ------------- ------------- ------------
Net cash flow used in investing
activities. . . . . . . . . . . . . . . . (6,996,000) (4,509,000) (13,813,000) (56,481,000)
-------------- ------------- ------------- ------------
Cash flow from (used in) financing
activities:
Purchase of treasury shares . . . . . . . (10,358,000) (12,088,000) (40,021,000) (31,894,000)
Reductions in long-term
debt, net. . . . . . . . . . . . . . . . (8,241,000) (19,367,000) (18,839,000) (14,788,000)
Issuance or reissuance of equity
securities. . . . . . . . . . . . . . . 2,844,000 2,128,000 20,024,000 8,837,000
Dividends paid. . . . . . . . . . . . . . (9,792,000) (9,178,000) (28,538,000) (26,302,000)
-------------- ------------- ------------- ------------
Net cash flow used in financing
activities. . . . . . . . . . . . . . . . (25,547,000) (38,505,000) (67,374,000) (64,147,000)
-------------- ------------- ------------- ------------
Effect of foreign exchange rate
changes on cash flow. . . . . . . . . . . 182,000 (274,000) 104,000 228,000
-------------- ------------- ------------- ------------
Net increase in cash and cash
equivalents . . . . . . . . . . . . . . . 18,949,000 16,921,000 72,026,000 10,608,000
Cash and cash equivalents at
beginning of period . . . . . . . . . . . 178,525,000 84,647,000 125,448,000 90,960,000
-------------- ------------- ------------- ------------
Cash and cash equivalents at end
of period . . . . . . . . . . . . . . . . $197,474,000 $101,568,000 $197,474,000 $101,568,000
-------------- ------------- ------------- ------------
-------------- ------------- ------------- ------------
</TABLE>
(1) Restated due to pooling of interests transactions completed in the third
quarter of 1996.
See Notes to Condensed Consolidated Financial Statements.
F-3
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1
In the opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments, consisting only of
normal recurring accruals, necessary to present fairly the financial position of
the Company and its subsidiaries at September 30, 1996 and their results of
operations and cash flows for the three and nine-month periods ended September
30, 1996 and 1995. These Financial Statements should be read in conjunction
with the Company's Current Report on Form 8-K filed on September 3, 1996.
Note 2
Accumulated depreciation of fixed assets was $40,897,000 and $34,148,000
at September 30, 1996 and December 31, 1995, respectively. The accumulated
amortization of cost assigned to contracts acquired was $443,290,000 and
$365,636,000 at September 30, 1996 and December 31, 1995, respectively.
Note 3
The Company has a systematic program to repurchase shares of its common
stock to meet the requirements for future issuance of shares upon the exercise
of stock options and warrants. During the three-month period ended September
30, 1996, the Company repurchased 445,400 shares of its common stock at a cost
of $10,358,000. For the nine months ended September 30, 1996, common stock
repurchases totaled 1,803,400 shares at a cost of $40,021,000. During the three
and nine-month periods ended September 30, 1996, exercises of warrants and stock
options resulted in the Company extinguishing subordinated notes, receiving cash
proceeds and issuing stock as follows:
Three Months Nine Months
Ended Ended
September 30, 1996 September 30, 1996
------------------ ------------------
Subordinated notes
extinguished $ 505,000 $17,437,000
Cash proceeds received $2,474,000 $19,682,000
Shares issued - -
Treasury shares reissued 221,366 2,788,138
As of September 30, 1996, the Company held 692,192 treasury shares.
As of September 30, 1996, 9,967,000 warrants and 7,129,000 stock options
were outstanding at weighted average exercise prices of $20.40 and $16.16,
respectively.
Note 4
The Company acquired Rogge Global Partners Plc and Clay Finlay Inc. on
August 28 and 29, 1996, respectively, in business combinations which have been
accounted for as poolings of interests. Accordingly, the consolidated statement
of income and the condensed consolidated statement of cash flows for the three
and nine-month periods ended September 30, 1995, as well as the condensed
consolidated balance sheet at December 31, 1995 were restated to include the
accounts of Rogge Global Partners and Clay Finlay.
Analytic Investment Management, Inc., an affiliated firm, acquired TSA
Capital Management on January 31, 1996 in a transaction that was accounted for
as a purchase. The Company also acquired OSV Partners, Provident Investment
Counsel and
F-4
<PAGE>
Pilgrim Baxter & Associates on April 22, 1996, February 15, 1995 and April 28,
1995, respectively, all in business combinations accounted for as purchases.
If all the acquisitions described in the paragraphs above had been
consummated on January 1, 1995 and if revenue sharing plans had been in effect
and after certain other pro forma adjustments have been made, pro forma results
of operations for the nine months ended September 30, 1996 and 1995 would have
been as follows:
1996 1995
---- ----
Revenues $635,296,000 $549,249,000
Net income $ 70,162,000 $ 57,973,000
Primary earnings per share $.98 $.83
Fully diluted earnings per share $.97 $.82
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The revenues of UAM's affiliated firms are derived from fees for investment
advisory services provided to institutional and other clients. Investment
advisory fees are generally a function of the overall fee rate charged to each
account and the level of assets under management by the affiliated firms. A
minor portion of revenues are generated when firms consummate transactions for
client portfolios. Assets under management can be affected by the addition of
new client accounts or client contributions to existing accounts, withdrawals of
assets from or terminations of client accounts and investment performance, which
may depend on general market conditions.
During the third quarter of 1996, UAM experienced a net increase in assets
under management of $11.5 billion to a total of $166.5 billion as of September
30, 1996. Acquisitions completed during the quarter and investment performance
added $9.5 billion and $3.3 billion, respectively. Net client cash flow for the
quarter, a negative $1.3 billion, was higher than the prior quarter but
significantly less than in the 1995 third quarter.
AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED AND OPERATING CASH FLOW (NET
INCOME PLUS AMORTIZATION AND DEPRECIATION)
Cost assigned to contracts acquired, net of accumulated amortization,
represented 68% of the Company's total assets as of September 30, 1996.
Amortization of cost assigned to contracts acquired, which is a non-cash charge,
represented 14% and 16% of the Company's operating expenses for the three and
nine-month periods ended September 30, 1996, respectively. Recording the cost
assigned to contracts acquired as an asset, with the resulting amortization as
an operating expense, reflects the application of generally accepted accounting
principles to acquisitions by UAM of investment management firms in transactions
accounted for as purchases, where the principal assets acquired are the
contracts which evidence the firms' ongoing relationships with their clients.
Although the contracts acquired are typically terminable on 30 days notice,
analyses conducted by independent consultants retained by UAM to assist the
Company in allocating the purchase price among the assets acquired and the
experience of UAM's firms to date have indicated that: 1) contracts are usually
relatively long-lived; 2) the duration of contracts can be reasonably estimated;
and 3) the value of the cost assigned to contracts acquired can be estimated
based on the present value of their projected income stream.
F-5
<PAGE>
The cost assigned to contracts acquired is amortized on a straight-line
basis over the estimated weighted average useful life of the contracts of
individual firms acquired. These lives are estimated through statistical
analyses of historical patterns of terminations and the size and age of the
contracts acquired as of the acquisition date.
When actual terminations differ from the statistical patterns developed or
upon the occurrence of certain other events, the Company updates the lifing
analyses discussed above. If the update indicates that any of the estimates of
the average remaining lives should be shortened, the remaining cost assigned to
contracts acquired will be amortized over the shorter life commencing in the
year in which the new estimate is determined. There has been no material effect
on the Company's financial position or results of operations as a result of
these updates.
Cost assigned to contracts acquired is amortized as an operating expense.
It does not, however, require the use of cash and therefore, management believes
that it is important to distinguish this expense from other operating expenses
in order to evaluate the performance of the Company. Amortization of cost
assigned to contracts acquired per share referred to below has been calculated
by dividing total amortization by the same number of shares used in the fully
diluted earnings-per-share calculation.
For purposes of this discussion, Operating Cash Flow is defined as net
income plus amortization and depreciation, as reflected in the Company's
Condensed Consolidated Statement of Cash Flows. Management uses Operating Cash
Flow not to the exclusion of net income, but rather as an additional important
measure of the Company's performance.
F-6
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
OPERATING RESULTS
NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO
NINE MONTHS ENDED SEPTEMBER 30, 1995
The 1996 and 1995 results of operations have been restated to reflect the
1996 acquisitions of Rogge Global Partners Plc and Clay Finlay Inc. which have
been accounted for as poolings of interests.
Revenues increased 21% to $634,805,000 for the nine months ended
September 30, 1996, from $525,112,000 for the first nine months of 1995 due to
several factors. This increase is the result of acquisitions, as well as the
impact of favorable portfolio performance achieved by UAM's affiliated firms
partially offset by the effect of net client cash outflows. The revenues of
Provident Investment Counsel, Pilgrim Baxter & Associates and OSV Partners,
acquired February 15, 1995, April 28, 1995 and April 22, 1996, respectively,
have been included since their acquisition dates.
Compensation and related expenses together with other operating expenses
increased 23% to $415,384,000 from $338,153,000 primarily reflecting the
acquisitions described in the preceding paragraph and higher compensation and
operating expenses earned at existing affiliates. The amortization of cost
assigned to contracts acquired increased 13% to $77,654,000 from $68,432,000
primarily as a result of the acquisitions discussed above as well as an
adjustment made during the first quarter of 1996 to the carrying value of a
contract with an executive at a UAM affiliate who died in March 1996. After
consideration of related insurance proceeds, this event did not have a material
impact on the Company's consolidated results of operations.
Interest expense decreased from $33,564,000 to $32,736,000, primarily due
to the decrease in the Company's average senior debt level.
Income before income tax expense increased 29% to $111,013,000 from
$86,037,000, reflecting the net result of the circumstances discussed above.
The Company's estimated annual effective tax rate, prior to restating for the
pooling of interests transactions described above, approximated 43% for both of
the nine month periods ended September 30, 1996 and 1995.
Net income increased 31% to $63,369,000 from $48,370,000 reflecting the
factors described above. Fully diluted earnings per share increased 28% to $.88
from $.69, reflecting higher net income and the effect of the Company's common
stock repurchased, partially offset by the impact of the issuance of shares of
common stock, the Company's higher common stock price and the exercise of
warrants and stock options on the calculation of earnings per share under the
modified treasury stock method. Amortization of cost assigned to contracts
acquired on a per-share basis increased to $1.07 from $.95 primarily as a result
of the acquisitions described above.
THREE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO
THREE MONTHS ENDED SEPTEMBER 30, 1995
The 1996 and 1995 results of operations have been restated to reflect the
1996 acquisitions of Rogge Global Partners Plc and Clay Finlay Inc. which have
been accounted for as poolings of interests.
Revenues increased 18% to $219,618,000 for the three months ended
September 30, 1996, from $185,367,000 for the third quarter of 1995 due to
several factors. This increase is the result of the overall increase in
revenues due to positive portfolio performance achieved by UAM's affiliated
firms as well as acquisition activity, partially offset by the effect of net
client cash outflows. The revenues of OSV Partners, acquired April 22, 1996,
have been included since its acquisition date.
F-7
<PAGE>
Compensation and related expenses together with other operating expenses
increased 23% to $145,523,000 from $118,665,000 primarily reflecting the
activity described above and higher compensation and operating expenses earned
at existing affiliates. The amortization of cost assigned to contracts acquired
decreased from $24,570,000 to $24,292,000.
Interest expense decreased from $12,697,000 to $10,941,000, primarily due
to the decrease in the Company's average senior debt level.
Income before income tax expense increased 35% to $40,215,000 from
$29,840,000, reflecting the net result of the circumstances described above. The
Company's estimated annual effective tax rate approximated 43% for both the
three month periods ended September 30, 1996 and 1995.
Net income increased 35% to $23,005,000 from $17,059,000 reflecting the
factors described above. Fully diluted earnings per share increased 33% to $.32
for the third quarter of 1996 from $.24 in the third quarter of 1995, reflecting
higher net income and the effect of the Company's common stock repurchased,
partially offset by the impact of the issuance of shares of common stock, the
Company's higher common stock price and the exercise of warrants and stock
options on the calculation of earnings per share under the modified treasury
stock method. Amortization of cost assigned to contracts acquired on a per-share
basis increased to $.34 from $.33 primarily as a result of the activity
described above.
CHANGES IN FINANCIAL CONDITION AND LIQUIDITY
The Company generated $149,242,000 and $50,475,000 in Operating Cash Flow
(net income plus amortization and depreciation) for the nine and three-month
periods ended September 30, 1996, respectively. The primary use of this
Operating Cash Flow was to repurchase shares of the Company's common stock, to
pay dividends to shareholders and to fund the costs of acquisitions. The
Company invests its excess cash in deposits with major banks, money market funds
or in securities, principally commercial paper of companies with strong credit
ratings in diversified industries. As of September 30, 1996, the Company had no
borrowings outstanding under its $500,000,000 Revolving Credit Agreement.
Management believes that the Company's existing capital, together with
Operating Cash Flow and borrowings available under its revolving line of credit,
will provide the Company with sufficient resources to meet its present and
reasonably foreseeable future cash needs. Management expects that the principal
need for financial resources will be to acquire additional investment management
firms, to fund commitments due or potentially due to existing affiliates, to pay
shareholder dividends and to repurchase shares of the Company's common stock,
which will require cash, the issuance of additional UAM securities, or some
combination thereof. Whether the Company ultimately completes additional
acquisitions or the timing of such acquisitions is not certain.
F-8
<PAGE>
UNITED ASSET MANAGEMENT CORPORATION
Exhibit 11
CALCULATION OF EARNINGS PER SHARE
(In thousands, except per-share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1996 1995(1)(2) 1996 1995(1)(2)
---- ---- ---- ----
<S> <C> <C> <C> <C>
Common and common equivalent shares:
Net income . . . . . . . . . . . . . . . . $23,005 $17,059 $63,369 $48,370
Adjustments thereto(3) . . . . . . . . . . 32 1,023 635 2,182
------- ------- ------- -------
Adjusted net income. . . . . . . . . . . . $23,037 $18,082 $64,004 $50,552
------- ------- ------- -------
------- ------- ------- -------
Average shares outstanding . . . . . . . . 68,918 68,246 68,631 67,994
Adjustments thereto(4) . . . . . . . . . . 3,243 5,240 3,889 4,361
------- ------- ------- -------
Shares used in computation . . . . . . . . 72,161 73,486 72,520 72,355
------- ------- ------- -------
Per share. . . . . . . . . . . . . . . . . . $.32 $.25 $.88 $.70
------- ------- ------- -------
------- ------- ------- -------
Common shares -- assuming full dilution:
Net income . . . . . . . . . . . . . . . . $23,005 $17,059 $63,369 $48,370
Adjustments thereto(3) . . . . . . . . . . 5 898 98 1,564
------- ------- ------- -------
Adjusted net income. . . . . . . . . . . . $23,010 $17,957 $63,467 $49,934
------- ------- ------- -------
------- ------- ------- -------
Average shares outstanding . . . . . . . . 68,918 68,246 68,631 67,994
Adjustments thereto(4) . . . . . . . . . . 3,243 5,240 3,889 4,361
------- ------- ------- -------
Shares used in computation . . . . . . . . 72,161 73,486 72,520 72,355
------- ------- ------- -------
------- ------- ------- -------
Per share. . . . . . . . . . . . . . . . . . $.32 $.24 $.88 $.69
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
- -------------------------
(1) Restated due to pooling of interests transactions completed in the third
quarter of 1996.
(2) Historical share and per-share figures restated for a two-for-one common
stock split declared May 16, 1996.
(3) The proceeds from the exercise of stock options and warrants in accordance
with the modified treasury stock method are first used to buy back up to
20% of the Company's common stock at the average price for the period in
the primary calculation and at the higher of the average or closing price
in the fully diluted calculation. Any remaining proceeds are used to
retire debt, and this adjusts income for interest assumed to be saved, net
of income tax, from the use of such proceeds.
(4) Adjusts shares for stock options and warrants under the modified treasury
stock method and contingently issuable shares based on the probability of
issuance, after adjusting for the stock assumed repurchased in accordance
with (3) above.
F-9
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE COMPANY'S NINE MONTHS ENDED SEPTEMBER 30, 1996 CONSOLIDATED STATEMENT
OF INCOME AND THE CONDENSED CONSOLIDATED BALANCE SHEET. THIS INFORMATION IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000796370
<NAME> UNITED ASSET MANAGEMENT
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 194,474
<SECURITIES> 0
<RECEIVABLES> 151,794
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 360,563
<PP&E> 71,332
<DEPRECIATION> 40,897
<TOTAL-ASSETS> 1,414,753<F1>
<CURRENT-LIABILITIES> 210,876
<BONDS> 641,043<F2>
0
0
<COMMON> 692
<OTHER-SE> 524,345
<TOTAL-LIABILITY-AND-EQUITY> 1,414,753
<SALES> 0
<TOTAL-REVENUES> 634,805
<CGS> 0
<TOTAL-COSTS> 415,384
<OTHER-EXPENSES> 77,654<F3>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,754
<INCOME-PRETAX> 111,013
<INCOME-TAX> 47,644
<INCOME-CONTINUING> 63,369
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 63,369
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
<FN>
<F1>INCLUDES $959,747,000 OF COST ASSIGNED TO CONTRACTS ACQUIRED, NET.
<F2>INCLUDES $150,000,000 IN SENIOR NOTES PAYABLE AND 491,043,000 IN SUBORDINATED
NOTES PAYABLE.
<F3>REPRESENTS AMORTIZATION OF COST ASSIGNED TO CONTRACTS ACQUIRED FOR THE NINE
MONTHS ENDED SEPTEMBER 30, 1996.
</FN>
</TABLE>
